Gold Price Forecast: XAU/USD finds cushion below $3,300 while 50-day EMA acts as key barrier
- Gold price finds temporary support below near $3,270, while downside seems more likely.
- Traders pare Fed dovish bets as Powell signals no rush of interest rate cuts.
- US President is optimistic about reaching a trade deal with China.
Gold price (XAU/USD) trades almost 1% higher around $3,315 during the European trading session on Thursday. The yellow metal bounces back after its monthly low around $3,270, posted earlier in the day, even as Federal Reserve (Fed) Chairman Jerome Powell has signaled that there is no rush for interest rate cuts.
On Wednesday, Jerome Powell said in the press conference, after the Fed left interest rates steady in the range of 4.25%-4.50%, that the current interest rate stance is “appropriate” to guard against “upside inflation risks”.
Fed’s support for keeping interest rates at their current levels has also forced traders to pare dovish bets. According to the CME FedWatch tool, the probability for the Fed to cut interest rates in the September meeting has diminished to 43.2% from 63.3% seen on Tuesday.
Higher interest rates by the Fed for longer bode poorly for non-yielding assets, such as Gold.
Meanwhile, an increase in investors’ risk appetite due to more deals being signed by Washington has also dampened the Gold price’s outlook. Ahead of the August 1 tariff deadline, Washington has reached trade agreements with a number of its leading trading partners, notably Europe and Japan. Trump has also expressed confidence that trade discussions with China are going well and a deal with Beijing looks likely. “We're moving along well with China,” Trump said on Wednesday, and added, “I think we'll have a very fair deal with China.”
Improving global economic tensions diminish demand for safe-haven assets, such as Gold.
Gold technical analysis
Gold price bounces back near $3,320 to retest the breakdown of the Symmetrical Triangle formation on a daily timeframe. The 50-day Exponential Moving Average (EMA) acts as a key barrier for the gold price around $3,320.
The 14-day Relative Strength Index (RSI) slides to near $40.00. A fresh bearish momentum would emerge if the RSI breaks below that level.
Looking down, the Gold price would fall towards the round-level support of $3,200 and the May 15 low at $3,121, if it breaks below the May 29 low of $3,245
Alternatively, the Gold price will enter uncharted territory if it breaks above the psychological level of $3,500 decisively. Potential resistances would be $3,550 and $3,600.
Gold daily chart
Gold FAQs
Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.
Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.
Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.
The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.
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